State Auditor Finds Misuse of Shantytown Redevelopment Funds

China’s National Audit Office said on Tuesday that local governments in 2013 misused more than 9 billion yuan ($1.44 billion) of funds intended for shantytown redevelopment, underscoring the problems Beijing could face as it makes the program core to the country’s urbanization move.

Officials obtained more than 1.5 billion yuan ($ 240 million) by submitting false redevelopment plans. Another 7.8 billion yuan ($ 1.25 billion) was misappropriated for infrastructure investment and construction of industrial parks, Liu Jiayi, the auditor general, said in a briefing to the standing committee of the National People’s Congress.

A local finance vehicle of the Xinxiang City in the northern Henan province redirected 777 million yuan ($124.62 million )to tourism development and other investments after raising 900 million yuan ($ 144.35 million) via bond issuance in the name of rebuilding shantytowns, the auditors say.

Chinese Rural Housing (Photo credit: jimbowen0306)

China said in March that it would invest this year more than 1 trillion yuan ($ 162 billion) redeveloping shantytowns as it seeks to boost urban population to support growth. The plan would involve more than 4.75 million households. Last year, Beijing completed 1.12 trillion yuan ($180 billion) of investments in subsidized housing.

The report comes as the leadership is trying to clamp down on rampant corruption. The latest official to go down is Liu Tienan, a former deputy director of China’s top economic planning body the National Development and Reform Commission indicted on bribery charges.

The auditors also found widespread irregularities in the use of poverty-alleviation funds. As much as 173 million yuan ($ 27.75 million) was misused, with another 15.95 million yuan ($ 2.56 million) going to individual pockets.

Local officials have relocated 4.2 billion yuan ($ 670 million). A total of 171 officials were under investigation, the auditors say.